A One-Salary Household

Hemorrhaging debt isn’t typically how a family moves to a one-salary household.

The corporate goodbye plan was hatched poolside during the summer of 2007, and began with my wife and I deciding to give our house a not-quite-extreme-but-still-impressive makeover, taking on massive debt in the process.  We knew that the move to one reliable salary would mean hitting the pause button on any major home projects, so we prioritized the most needed upgrades, those deserving immediate attention and anything else that could become a problem in the near future, and came up with the following big three:

• Convert the sunroom & one car garage into livable space for our expanding family.
• Replace the vinyl siding.
• Replace the 20+ year-old old roof.

Important Reasons

The decision for me to stay home was based on the nagging reality that our two children were spending too much time in daycare, and way too little with the people who brought them into this world. We looked at our daily schedule – drop off at 7am, pick up at 5pm, home at 5:30, preparing family dinner, eat and clean-up until 7pm, bath & nighttime routine (brush teeth, read books, etc.), then put them to bed by 8pm.

At the end of those nights, my wife and I would look at each other in amazement that we’d spent only about 2 ½ hours with our kids.

That’s a whopping 12 ½ hours in the presence of my offspring during the week!  There are deadbeat dads more engaged with their kids than that.  It got to the point where it simply wasn’t acceptable to have our children raised by, essentially, strangers for 50 hrs a week, just so we could take an extra vacation and buy more crap we didn’t need.

Additionally, I was only one year away from having my oldest daughter, then 4 ½, become a full day kindergartener.  It’d be 13 years (at least) before the school system would spit her back out to me, so we decided that I’d trade in my 40+ hours a week at work for those many hours with her, before kindergarten steals her away.

It may seem crazy to prepare for the dropping of an income by spending thousands of dollars.  It could be said that we took the contrarian’s approach to this move, spending money as wisely as we could, to ensure our total comfort in our modest home  – the place where I’d be spending most of my time going forward.

Transitioning to Financial Changes

With all of the contractor’s invoices paid by the end of 2007, we entered the New Year with a clear picture of our debt situation.   Our budget for 2008 was configured accordingly, with the intention of paying off everything, including one lingering car loan.  We sacrificed a lot that year, doing without much of what makes us happy, including vacations, concert tickets, CDs, and theater subscriptions.  It wasn’t until we were no longer saddled with revolving credit card bills, a line of credit balance or car payments and had a house we were finally completely happy with — that I was able to bid farewell to the cozy confines of my cubicle and the relative safe steady paycheck that came with it.  This was August 22^nd, 2008.

To be a middle class family in America generally means a pair of working parents.  It’s been this way for the better part of three decades and it’s this way for a reason, well several actually.  One of which is that we want far more stuff than at any point since maybe the Romans craved new lands.  Breaking free of this uniquely modern American mindset hasn’t been a walk in the park.

My wife and I arrived upon the doorstep of the at-home dad world with careful consideration of our financial situation, both present and future. We knew that to make this happen we were going to have to permanently do without certain luxuries two healthy paychecks afforded us.  Additionally, our financial future would be severely altered, since no job = no 401(k) contributions or employer match.  Now, I’ve never been much of a planner, but even I hunkered down to crunch numbers and make certain that we wouldn’t have to dip into my retirement savings 6-months into this experiment. In this way, becoming an at-home dad challenged my own make-up.  If we were going to be successful in living within our means and making sound financial choices on one steady income, I would have to think ahead, plan and give up some of the spontaneity I enjoyed when my direct deposits were filling up the bank account.

I recognize that many families make tough choices everyday, many of them a lot harder than those my wife and I made.  I also witness many American families extending themselves to the brink of financial disaster in an effort NOT to make choices.  Giving up a vacation, eating out less, and buying less stuff in 2008 wasn’t easy, and there are still times we’re flat miserable with what we cannot do. However, making sacrifices teaches our children that you simply cannot have everything you desire in life, at least not all at once, and prevents us from being flat broke.

photo credits: stmoritz1960, Holtsman, and Leonid Mamchenkov

Or in this case, a butcher knife.

I swear to Xenu, lord and dictator of the Galactic Confederacy, that if I ever encounter another packaging that requires stabbing motion to open, I’m going to send Tom Cruise and his Scientology pals after the person responsible.

In all seriousness, from today forward, I’m genuinely going to make a conscious effort to avoid purchasing poorly-designed packaging that’s hard to open.

And don’t even get me started about the cost of printer ink.

Curious about the $8,000 home tax credit for first-time homebuyer?  If you’re in the position to claim this tax credit, you’ve most likely read plenty about it.  The gist is simple,  homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. This home tax credit:

• Applies only to homes used as your principal residence.
• Reduces your tax bill or increases your refund, dollar for dollar.
• Is a fully refundable tax credit, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

Checkout this one minute and 29 seconds video by Hector from the IRS explaining the first-time home buyer tax credit.  If you don’t want to watch the video, a summary of the highlights can be found below the video.

Qualifying and Claiming the $8000 Home Tax Credit

• You may qualify for the home tax credit if you bought a home in 2009 or you’re considering buying one this year.
• You qualify as a first-time home buyer if either you or your spouse haven’t own a home in 3 years.
• If you’re buying a home this year (2010), you must sign a binding contract by April 30th, 2010, and close no later than June 30th, 2010.
• Also, if you’re a long-time home owner, and you’re purchasing a replacement home for your principal residence, you may qualify for a credit up to $6,500.
• If you bought the home in 2010, you have the option to claiming the home tax credit either on your 2009 or 2010 tax return.
• To get the credit this year.  File your tax return, attach form 5405 and supplement documents (such as copy of settlement statement).
• Important: To claim the tax credit this year, you must file the tax return on paper. You won’t be able to claim the credit on e-file as the current e-file system isn’t able to handle the supporting documents that must be submitted along with the home tax credit.

Tax Forms You Will Need

• Good old Form 1040 (report it on line 67 for the 2009 return)
• Form 5405 (attach with return)

Additional Resources:

• Questions and Answers on home tax credit from IRS
• Additional Questions and Answers (qualifying, due dates, etc.)
• Filing requirements on the home tax credit

Before you start setting up various financial New Year resolution goals, one quick exercise you should probably do is to focus on prioritizing  your financial weakness that cost you the most money.  Whether it’s lack of will power in spending, inability to comparison shop properly, impulsive financial decisions, risky stock purchases — we all probably have made a number of blunders that has cost us more money than we’d care to admit.

The reason why I believe it’s important to focus on the weakness or mistakes that cost you the most money, is simply because the return on time investment will have a more meaningful financial impact.  Unfortunately, whether or not it’ll be easy for you to fix or improve that particular financial weakness will be another story.

But take heart, although baby steps are a perfectly legitimate way in bettering yourself, there really isn’t anything wrong with trying to tackle a big problem and failing — after all, none of us are perfect.  Maybe you tried to cut your monthly lavish spa treatment but was only able to stick to the gun for 2 months.  So what?  That two month’s worth of savings is decisively better than never taking the initiative to save.

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Hey Jerk Face,

If the car you see in your side mirror is appearing to come CLOSER to you (e.g., object in mirror is getting LARGER), then odds are that he’s driving FASTER than you and thus it is probably a BAD idea to change into that particular lane at the very last minute.

Just thought you’d like to know. Jerk face.

Happy New Year!

January 5, 2009 – Rescuing Fannie Mae

(source)

The Federal Reserve Bank of New York begins purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae under a program first announced on November 25, 2008.

January 12, 2009 – Allocating TARP Funding

At the request of President-Elect Obama, President Bush submits a request to Congress for the remaining $350 billion in TARP funding for use by the incoming administration.

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It’s sad but true, I used to be a real FICO score junkie (especially during the time where I was trying to make my scores consistently more positive). If there was anything I learned from my binge of credit score tracking was that you should never pay full price for your FICO scores from Fair Isaac. In recent days, there have been a number of myFICO promotional code available online which will save you a few pretty pennies. Check the promotional code below if you’re currently interested in purchasing some of the scores and reports from myFICO.com. Each link will take you to each product’s page and automatically embed in the discount code for you.  Read on for more description of each of the myFICO product offerings and when you should (and shouldn’t) purchase them — after all, being a credit score junkie can’t be too easy on the wallet.

MYPOINTS30: 30% off myFICO Standard

What is it? myFICO Standard consist of a FICO score and a credit report of your choice from either Equifax or TransUnion. If you’re wondering about a FICO score from Experian, unfortunately the agreement between Experian and Fair Isaac fell through, so you can no longer purhcase your Experian FICO score thru myFICO.com (or anywhere else for that matter). A FICO Standard purchase will give include an explanation of the positive and negative factors affecting your score, plus access to the FICO Score Simulator, which shows you how actions like paying off an existing account or opening new accounts may affect your FICO scores.

Why do I need it? This is a no frills purchase, and is a solid choice for people that simply wants to know what their FICO score is based on their Equifax or TransUnion credit history. Maybe you need to know your FICO score before you head to the car dealership to negotiate financing terms or maybe you were just told by a lender that your FICO score ranges were much lower than you expected — in these situations, purchasing a real FICO score from myFICO can give you more knowledge and ammunition before engaging in financial transactions that involves credit history.

How much does it really cost? A FICO Standard purchase cost $15.95 per purchase, and in perspective, this is quite a bit of money to pay just for a set of numbers (of course, you also receive a detailed credit report, but you can always request those for free annually). There is no monthly recurring cost and this is a one-time purchase. With discount, the expensive purchase can be lighten to $11.80. myFICO regularly releases certain promotional code, so you should never pay full price. Either bookmark this page or keep an eye open for new promotions that will give substantial discounts.

SCOREWATCH30: 30% off myFICO Score Watch

What it is? Score Watch from myFICO.com provides you with daily monitoring of your Equifax Credit Report and weekly monitoring of your FICO score.  It notifies you when you may qualify for better interest rate (such as significant change to your FICO score), delivers alerts when important changes to your score and report are detected, and shows you key factors affecting your FICO score and how lenders view you.

Why do I need it? You may have recently come across financial situations where you need to keep on tabs of your credit score.  Perhaps you’re trying to better understand and control your credit worthiness before applying for a large loan such as a mortgage or an auto loan; or perhaps you’re actively trying to keep track of your credit scores so you can better negotiate with lenders for more favorable interest rates.

How much does it really cost? myFICO’s Score Watch can be as cheap as the price tag of FREE if you cancel the service within 30 days.  Thankfully, unlike other trial services, Fair Issac doesn’t try to make canceling their service as difficult as canceling an AOL subscription.  A week before your trial membership is over, myFICO will send you an email reminding you that your trial is about to end.  If you wish to cancel, you can simply click the “cancel subscription” button within the email, and within minutes your subscription will be canceled.  No need to call and deal with any potential upsale.

Take note however that the service can cost money, and for certain people, it just doesn’t make sense to pay the monthly subscription fee.  Without the discount, the monthly subscription fee is a $9.95, with a 3 months advance payment required, which brings the cost to $29.85.  You can potentially “save” a bit of money by opting for an annual subscription of $99.95, but  with the discount, the monthly subscription fee is at $6.96, making the 3 month cost $20.89 and an annual subscription costing you $83.58.  The current myFICO promotional code discount definitely makes purchasing the credit score more of a bargain, but again, consider carefully if you need such a subscription before you sign-up.

CPPSAVINGS: 25% off FICO Quarterly Monitoring

What is it? FICO Quarterly monitoring provides you with quarterly update of your TransUnion FICO credit score and credit report.  In short, you get 4 TransUnion FICO score per year, and in a sense this is a variant of the Score Watch service, but pulls your TransUnion credit history instead of your Equifax credit history.  The FICO Quarterly Monitoring service also use 400 other data sources for signs of identity theft, providing you alerts whenever there are new information added to your TransUnion credit report.  Lastly, you’ll also receive a $25,000, no-deductible identity theft insurance policy from St. Paul Travelers as part of your subscription.

Why do I need it? This is a product that’s pitched for those that may have reasons to suspect their identity have (or will be) stolen.  With FICO Quarterly Monitoring, you can have a somewhat peace of mind as you set specific alerts so you can be notified whenever additional information are tied into your credit history (such as name, phone number, residential address, etc.).  If you’ve recently lost your wallet that contains many of your personal and sensitive financial information, FICO Quarterly Monitoring may be a good service to consider (as it provides you with weekly monitoring).  If you suspect that you may be a victim (or potential victim) of identity theft, whether from strangers or family members (sadly this happens frequently), FICO Quarterly Monitoring can be an additional tool to ensure your credit profile isn’t being fiddled with.  Take note however that this service will only monitor your TransUnion credit profile.  If you’re absolutely certain you’re a victim of identity theft, you may want to consider a credit freeze.

How much does it really cost? The service will cost $4.95 monthly or with an annual subscription rate of $49.95.  With the discount promotional code above, you will save 30% off your monthly subscription fee or your annual rate, bringing the cost to $3.46 per month or $34.96.  You’ll also receive an additional 20% discount whenever you opt to purchase other myFICO services whenever you’re subscribed to FICO Quarterly Monitoring (for example if you want to complement the service with an additional subscription of Score Watch).  In some sense, this is one of the cheaper service, especially if you’re ever in a situation where you need to purchase more than two TransUnion FICO scores or report.

It’s been awhile since I’ve highlighted worthwhile customer service stories. Here’s a decent customer service done-right story straight from today’s Reddit front page:

Trader Joe’s did something awesome!

My mom is very worried about my grandfather, age 89. He’s a retired engineer and a navy officer of WWII who lives on his own in an apartment complex. He hardly keeps enough food for himself because he feels as though he can drive out whenever he’s hungry (and live off of cereal and prune juice). The problem is that he got snowed in today. He told my mom that one day without food couldn’t hurt, but my mom would not accept that. She ended up calling a bunch of places trying to find one that would deliver to him. She eventually ended up asking if Trader Joe’s did delivery and they told her they could in this instance. She read out a big order and then proceeded to ask them how she should pay. They told there was no need to pay and said, “Merry Christmas!” Trader Joe’s doesn’t do delivery, nor give food out for free normally. I’m glad to see people out in the world care about strangers and help out.

Follow-up: They delivered the food within 30 minutes and further clarification from my mom reveals that when she was ordering food, they kept suggesting other items for him (he’s on a low sodium diet). He ended up getting a few days worth of food from them. In case people are wondering, it’s the Trader Joe’s in Wayne PA. The funniest part is now my grandpa is trying to leave his apartment in the snow to thank them, but I think we’ve stopped him.

Via [Reddit.com]

Kudos to Trader Joe’s and whoever handles their social media marketing for keeping on top of things and responding to the story (the Narwhal is a nice touch too).  I hardly ever shop there since I’m kind of a cheap ass (though from reading the comments I may be making too much of an assumption about its prices), but businesses that are pro-customer should always get a shout-out.